Everything You Need to Know Before Taking a Car Loan

Car Loans

The process of buying a car is rarely done without funding. If you find that the field of car loans is complex, then to help you understand the basics of financing at a car dealership we will here discuss the in and out of car financing.

The first step is to validate your credit rating. This is the basis of all loans. The higher your score, the easier it will be to get a loan for your future car. If you paid regularly for your previous credits your rating will be maintained at a good level. But in case the situation is not that favorable for you here are the solutions:

1. If you have never obtained credit

If you have never applied for financing, you can access credit in a number of ways, the two most common ones being:

Appealing to a co-applicant (endorser)

The dealer will verify the credit rating of your co-applicant. To endorse you, he will have to have a good credit record. The endorser has to commit to guarantee the loan in the event of default. In addition, you should also know that the loan endorsed will be registered in your credit file as well as his.

Join the first buyer program

This one allows you to obtain financing, provided you fulfill certain criteria. You may have to provide proof of work of at least 3 months and proof of income and/ or deposit an amount in cash. You may have to respect a maximum amount to borrow for a first loan.

Performing multiple credit applications in a short period of time can affect your credit rating. For example, applications for a vehicle loan, for furniture, a house, or credit cards in large numbers in a very short time can make future creditors more cautious.

2. If you had difficulties in the past with your credit rating

In case you have already borrowed, but you have not been able to fulfill your payment commitments, it is still possible for you to get a loan through second and third chance credit to your dealer. Of course, compliance with a variety of different criteria will be required.

A second or third chance credit loan can help you, gradually, rebuild your credit rating. Financing a vehicle is considered to be a long-term loan will demonstrate to creditors your willingness to meet your commitments.

Different interest rates

There are two types of rates, usually associated respectively with the purchase of a new car and a used car.

Preferential rates

Usually reserved for new vehicles, most manufacturers’ rates are between 0% and 3.99%. The interest rate offered at the time of your purchase will be set by the manufacturer according to the model of the chosen vehicle and the term. It will be much the same everywhere in the USA.

Standard rates

Usually reserved for used vehicles, they vary between 3.69% and 9.99%.

The terms of repayment

To establish a term that suits you, you will have to rely on your personal budget and the management of your finances. If your credit rating is good, it will be up to you to set the amount you can pay per year and determine the terms of payment. Choosing a payment frequency, weekly, biweekly, or monthly will not make a big difference to the interest paid in the end.

You can then think of the term: that is, how many months you would like to repay your loan. Sometimes, you will prefer to repay your payment over a longer term to have the desired model of vehicle with the monthly payment fixed at the beginning. Also consider the possibility of giving a cash amount, or leaving your vehicle in exchange to adjust your monthly payment to your initial budget. In the case where the dealer takes your vehicle in exchange, this allows a tax saving. An on-site advisor can offer you several options to get the monthly payment that fits your budget.

All funding terms such as weekly, bi-weekly, bi-weekly or monthly are not available in all financial institutions. You must, therefore, agree in advance and validate the options available at the dealership.

If you want to sell your vehicle before you finish paying

If you want to sell your vehicle, you have several options, the two most common ones are:

You can leave the vehicle for sale at the dealership when you buy or lease a new vehicle. If there is still a link (that is, there is always an active balance on the loan) on the vehicle left in exchange, the dealer will send a check directly to the originating financial institution. Although the dealer often gives you less than the market value since your vehicle is dedicated to resale, you could save tax on your purchase. For example, if your new vehicle costs $ 40,000 and the dealer gives you $ 10,000 for your old vehicle, you will pay sales tax on only $ 30,000.

You can sell your car to an individual. In this situation, you must make sure you have repaid your loan in full. Several rules govern the sale to an individual, particularly with respect to the QST. Ask the SAAQ in advance to avoid unpleasant surprises. A buyer may and should ask you for proof that the vehicle is royalty-free, that is, the debt is fully paid at the time of purchase. It may require an official document from the Register of Personal and Movable Real Rights (RDPRM). You will have to shell out a few bucks and enter your serial number to get it.

Conclusion:

when you decide to buy a vehicle at a dealership it is advisable that you talk to a consultant who can accompany you. Feel free to express your needs and budget right from the start. By having this basic information, they will be better equipped to allow you to buy the vehicle that meets your needs and your budget. It’s their job to help you be happy with your purchase.

How to manage your personal finances wisely

Personal finances

You can make a lot of money but if you do not know how to manage your money, you will encounter difficulties. To manage your personal finances well is essential to advance and not to be a simple average consumer.

If you are about to get your finances in order and optimize them, it’s probably because you have a plan in mind. You need motivation. This motivation can come from goals that you have set, such as becoming financially independent, leaving your comfort zone and going around the world next year, buy an apartment etc. Whatever your goals, find a reason why you need to optimize the management of your finances.

To overcome the challenge of personal finances, nothing beats good planning and motivating goals.

1. Define your financial goals

Buying a first home, starting a family, retiring at age 60 or traveling several months a year: these are all goals that make you dream. If one wants to realize one’s dreams, one must start by setting financial goals. Also, good financial planning is the key to success.

When defining your goals, you have to think in the short and long term. What do you want to accomplish in the coming months? Can you save enough to afford the much-deserved trip after a busy year? Should you instead start contributing to an RRSP? These are short-term goals.

Those who are beyond the six-month or one-year horizon are in the middle term, for example buying a first home in three years. In the long term, it is normally our life projects.

The benefit of setting financial goals is to realize what financial measures are needed to achieve them. If buying a first home seems unreachable when you’re 20, it becomes more realistic when you set a monthly savings schedule.

2. Make a personal budget

The personal budget is the everyday tool to achieve its goals in the short, medium and long-term. It keeps track of our income and expenses and gives us a clear picture of our financial situation. Many people avoid making a budget because they believe that it is necessarily binding. A budget is above all a matter of choice. We must first stop prioritizing spending, and then have the discipline to make consistent decisions every day.

Personal finance advisers also agree on the importance of establishing a financial cushion that is equivalent to three to six months’ salary, for contingencies. If you lose your job or a loved one falls ill, you can continue to pay your rent and expenses until the situation is restored.

3. Understand the rules of saving

The budget also includes the savings. Saving early is a highly profitable strategy because every year, you usually make a little profit from the money you save. Because savings usually generate interest. For example, if you save $ 10,000 at an annual interest rate of 2%, you will have $ 10,200 at the end of the year. You are getting $200 more without any effort. If we repeat the operation every year, the amount that becomes fruitful becomes even more important, especially if we regularly save.

4. Reduce and eliminate debts

Do not wait until the debts crush you before taking the situation in hand. Eliminating them as soon as possible will have a lasting impact on your future financial health since the longer you drag a debt, the more expensive it becomes in the end. It is possible to reduce one’s debts by cutting some non-essential expenses in one’s budget, by always paying the minimum and repaying the largest loans first.

5. Manage your money according to your profile

If you are a student you must have to juggle classes, jobs, part-time work, tuition, and books that are sometimes very expensive. To avoid getting lost in the whirlwind of a young adult’s life, an adopted budget is the key. A student can focus on his studies, without financial worries. Many students even choose to work only in the summer, as they plan their spending well throughout the year.

If you are a parent the birth of a child causes a lot of upheavals, especially in financial terms. Not only does it cause a lot of expenses, but it often causes a drop in income for parents, who take parental leave. According to a study a toddler can incur up to $ 3,000 in extra expenses per year for a household, while it takes about $ 4,500 a year for a teenager. It is better to plan it in your budget if you plan to start a family.

If you are retired the retreat is obviously made for fun, but that’s no reason to lose sight of your finances. Retirement is often accompanied by a decline in income, so expenses must also follow. Of course, a well-planned retirement will be more enjoyable, as it will not result in a significant decline in the standard of living. That’s why starting to save early should be a winning strategy for everyone’s lives.

Signs that your personal finances are doing poorly

  • When there is a balance on the credit card at the end of the month: The credit card is a source of short-term credit that should be paid back monthly. Interest rates are too high to make another use.
  • When you are unable to save: Savings should be a budgeted habit in the same way as any current expense. We deserve, after all, that a portion of the hard-earned money goes towards our projects, not just the cost of living.
  • When there is a gap between your priorities and the reality: if you are feeling overwhelmed by your financial situation because you are unable to invest in what you deem important, is undoubtedly a big red flag.

Conclusion:

From a personal development perspective, we all need money to make our projects a reality and achieve our goals. It is possible to have projects that do not take into account money, certainly, but in our life, money allows many things. To find accommodation, to plan a trip, to organize a wedding, to invest, to even simply, to provide for one’s needs, money is necessary. Money is not an end in itself, money is a means.